City of Oakland v. Raiders

          ORDER GRANTING MOTION TO DISMISS Re: Dkt. No. 41

          Joseph C. Spero Chief Magistrate Judge.

         I. INTRODUCTION

         Plaintiff the City of Oakland (“Oakland”) brings this action against the Defendants the Oakland Raiders (the “Raiders”), the National Football League (the “NFL”), and all thirty-one other teams in the NFL, asserting that the Raiders' decision to leave Oakland, and the NFL's approval of that decision, violate the antitrust laws and the NFL's own governing documents, among other claims.^[1] Defendants move to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court held a hearing on July 19, 2019. For the reasons discussed below, Defendants' motion is GRANTED, although Oakland may amend its claims if it can allege facts sufficient to cure the deficiencies identified below. If Oakland chooses to amend, it may file an amended complaint no later than September 9, 2019.^[2]

         II. BACKGROUND

         A. Factual Background and Allegations of the Complaint

         Because factual allegations are generally taken as true on a motion to dismiss under Rule 12(b)(6), this section recites the allegations of Oakland's complaint as if true. Nothing in this order should be construed as resolving any issue of fact that might be disputed at a later stage of the case.

         1. Overview of Raiders History

         The Raiders were based in Oakland from the creation of the franchise in 1960 through 1982, and again from 1994 through the present, playing their home games for most of that period at a stadium in Oakland known as the Coliseum. See Compl. ¶¶ 38-47. The Raiders were managed and at least partially owned by the late Al Davis for much of the team's existence. See Id. ¶¶ 40-50. Al Davis's son Mark Davis assumed control of the team after his father's death in 2011. Id. ¶ 54.

         The team's history has been fraught with litigation, much of it related to the team's 1982 move to Los Angeles and its lease at the Coliseum after returning to Oakland. As but a few examples, Oakland unsuccessfully attempted to acquire the Raiders through eminent domain (City of Oakland v. Oakland Raiders, 174 Cal.App.3d 414 (1985)), the Raiders and a stadium commission in Los Angeles successfully sued to enjoin enforcement of the NFL's then-existing rules restricting movement of teams (L.A. Mem'l Coliseum Comm'n v. Nat'l Football League, 726 F.2d 1381 (9th Cir. 1984)), and after the Raiders' return to Oakland, the Raiders and Oakland engaged in litigation over the status of the Raiders' lease of the Coliseum (Compl. ¶¶ 48-49).

         2. Plans to Relocate

         In 2017, the Raiders announced that they were relocating from Oakland to Las Vegas- giving rise to the present case. Compl. ¶ 2. Oakland alleges that Mark Davis and the Raiders had considered such a move as early as 1998, when Mark Davis registered the domain name “LasVegasRaiders.com” (which he subsequently renewed annually) and acquired a cell phone number with a Las Vegas area code. Id. ¶ 51.

         “In December of 2008, NFL Commissioner Roger Goodell . . . announced that the NFL wanted the Raiders to receive a new stadium, ” but the Raiders renewed their lease at the Coliseum the following year. Id. ¶ 52. The Raiders nevertheless engaged in discussions with the San Francisco 49ers regarding potentially sharing a stadium in Santa Clara, California. Id. ¶ 53. In 2010, a private entity proposed building a stadium in Los Angeles for several NFL teams including the Raiders, and in 2012, the NFL sent a memorandum to its teams describing circumstances under which two teams could move to Los Angeles, which “was believed to be largely addressed to the Raiders, Rams, and Chargers.” Id. ¶¶ 53, 55. Those three teams applied in 2016 to relocate to Los Angeles, but the NFL granted the Raiders permission for such a move only if the Chargers declined to move to Los Angeles. Id. ¶¶ 60-61.

         Meanwhile, the Raiders also pursued relocation to Las Vegas. Mark Davis told an NFL executive in 2014, “I'm going to Vegas, baby!” Id. ¶ 57. Despite that statement and the application to move to Los Angeles, the Raiders continued negotiating with Oakland regarding a potential new stadium. Davis announced in 2015 that he would commit $500 million to build a stadium if Oakland provided an additional $400 million, for a total cost of $900 million. Id. ¶ 59. In January of 2016, Davis met with Nevada billionaire Sheldon Adelson to discuss funding a $1.7 billion stadium in Las Vegas, despite having announced his intention to keep the Raiders in Oakland at a town hall “a few weeks” earlier. Id. ¶ 62. Davis told a Nevada tourism committee in April of 2016 that he would commit $500 million to a stadium in Las Vegas, and the following month characterized his position as a “commitment” to move the Raiders to Las Vegas if sufficient public funding was provided for a stadium. Id. ¶ 63. “In August 2016, Adelson convinced the Nevada state legislature to create a bill that appropriated $750 million in public money, which had originally been intended to fund a public project, to a professional football stadium.” Id. While NFL Commissioner Goodell stated in September 2016 that he hoped the Raiders would reach an agreement for a stadium in Oakland, Dallas Cowboys owner Jerry Jones encouraged Nevada lawmakers to pursue bringing the Raiders to Las Vegas. Id. ¶ 64.

         Oakland, meanwhile, attempted to reach a deal to keep the Raiders in Oakland. An investment group including former NFL players Ronnie Lott and Rodney Peete offered $600 million towards a stadium in Oakland in November of 2016-$200 million more than the $400 million in public funding that the Raiders had claimed was needed in 2015. Id. ¶ 65. In December of 2016, Oakland officials voted to enter negotiations with Lott's group, earmarking $350 million in public funds for the project, to be combined with $400 million from Lott's group and $500 million from the Raiders for an approximately $1.3 billion stadium. Id. ¶ 65. The proposal “included the possibility that Mark Davis would eventually sell some part of the team to the Lott group, ” which Oakland characterizes as a development that the NFL should have supported as consistent with its efforts to increase leadership positions held by racial minorities. Id. ¶ 66. While Oakland contends that “the Lott Proposal was real, ” the NFL dismissed it as incomplete and unworkable, and a Raiders official at a “closed-door NFL meeting” described it as a “political, cover-your-ass joke.” Id. ¶ 67.

         The Raiders officially applied to the NFL for permission to move to Las Vegas on January 19, 2017. Id. ¶ 68.

         3. NFL Rules Regarding Team Relocation

         The relocation of NFL teams is governed by Article 4.3 of the Constitution and Bylaws of the NFL:

The League shall have exclusive control of the exhibition of football games by member clubs within the home territory of each member. No. member club shall have the right to transfer its franchise or playing site to a different city, either within or outside its home territory, without prior approval by the affirmative vote of three-fourths of the existing member clubs of the League.

Compl. Ex. 1 art. 4.3. In litigation related to the Raiders' 1982 move to Los Angeles, the Ninth Circuit affirmed a jury's determination that Article 4.3, at least as the NFL sought to apply it to block that relocation, was an unreasonable restraint of trade in violation of § 1 of the Sherman Act. L.A. Mem'l Coliseum, 726 F.2d at 1390-98. The Ninth Circuit's opinion discussed changes that might make similar restrictions permissible:

To withstand antitrust scrutiny, restrictions on team movement should be more closely tailored to serve the needs inherent in producing the NFL “product” and competing with other forms of entertainment. An express recognition and consideration of those objective factors espoused by the NFL as important, such as population, economic projections, facilities, regional balance, etc., would be well advised. See L. Kurlantzick, Thoughts on Professional Sports and the Antitrust Laws, 15 Conn. L.R. 183, 206 (1983). Fan loyalty and location continuity could also be considered. Id. at 206-207. Al Davis in fact testified that in 1978 he proposed that the League adopt a set of objective guidelines to govern team relocation rather than continuing to utilize a subjective voting procedure.

Some sort of procedural mechanism to ensure consideration of all the above factors may also be necessary, including an opportunity for the team proposing the move to present its case. Id.; see Silver v. New York Stock Exchange, 373 U.S. 341 (1963) (without procedural safeguards, the collective act of the Exchange in disconnecting the wire service to a broker constituted a boycott, per se illegal under § 1); cf. Deesen v. Professional Golfers Ass'n, 358 F.2d 165 (9th Cir.), cert. denied, 385 U.S. 846 (1966) (where PGA had reasonable rules governing eligibility of players for tournaments, there was not a § 1 violation). In the present case, for example, testimony indicated that some owners, as well as Commissioner Rozelle, dislike Al Davis and consider him a maverick. Their vote against the Raiders' move could have been motivated by animosity rather than business judgment.

Id. at 1397-98.

         At some point after that decision, the NFL Commissioner, pursuant to his authority under Article 8.5 of the NFL bylaws to “interpret and from time to time establish policy and procedure in respect to the provisions of the Constitution and Bylaws, ” promulgated “Policy and Procedures for Proposed Franchise Relocations, ” fleshing out the basic three-fourths vote required by Article 4.3 with additional policies, procedures, and factors to be considered. Compl. ¶ 32 & Ex. 2. Under that policy, “each club's primary obligation to the League and to all other member clubs is to advance the interests of the League in its home territory, ” and relocations are “disfavor[ed] . . . if a club has been well-supported and financially successful and is expected to remain so.” Id. Ex. 2; see Id. ¶ 33. The policy also provides that the “business judgment” to be exercised in deciding whether to approve a transfer “may be informed by consideration of” a non-exhaustive list of factors including, for example, fan loyalty, stadium adequacy, financial performance, the degree of good faith negotiations to remain, and the extent to which team owners have contributed to circumstances giving rise to the proposed relocation. Id. Ex. 2 pt. C; see also Id. ¶ 34. Oakland characterizes these policies as an effort to avoid antitrust problems by complying with the suggestions of the Ninth Circuit in Los Angeles Memorial Coliseum. Id. ¶ 32.

         Under the policy, “the relocating club will ordinarily be expected to pay a transfer fee to the League” if its request is approved, to “compensate other member clubs of the League for the loss of the opportunity appropriated by the relocating club and the enhancement (if any) in the value of the franchise resulting from the move.” Id. Ex. 2 pt. E; see Id. ¶ 36. Oakland characterizes this fee as “a source of income that the NFL Club owners do not share” and “a pure cartel payment that goes straight to the NFL Club owners' bottom lines when they together decide that a team should leave its Host City.” Id. ¶ 37.

         4. Approval of Relocation to Las Vegas

         On March 6, 2017, Bank of America agreed to provide financing for the Las Vegas stadium, and the NFL teams' owners held a meeting the same day to determine the fee that the Raiders would be required to pay if the relocation was approved. Id. ¶ 69. Oakland characterizes that meeting as “effectively an auction for a ‘yes' vote” where “the relocation fee was bid up until enough NFL owners were satisfied with their personal payment to vote ‘yes, '” and cites a report that owners purportedly opposed to the relocation pushed for a higher fee. Id. The owners agreed on a fee of $378 million. Id.

         Oakland submitted its final proposal in conjunction with Lott's investment group the same month, but the NFL rejected it as not “clear and specific, actionable in a reasonable timeframe, and free of major contingencies, ” and thus not “a viable solution.” Id. ¶ 72. Oakland Mayor Libby Schaaf appealed to the team owners to reject the relocation, although she conceded “that Oakland was ‘unable to provide the level of public subsidy Nevada offers.'” Id. ¶¶ 73-74.

         The owners voted 31 to 1 to approve the relocation. Id. ¶ 75. According to Oakland, that vote violated the NFL's relocation policy, because “every objective factor to be considered in the Relocation Policies favored a stay in Oakland, ” the Oakland market is more favorable than Las Vegas, and Oakland negotiated in good faith the keep the Raiders. Id. ¶¶ 75, 78-79. Oakland cites a statement from the Miami Dolphins' owner Stephen Ross-the lone dissenting vote-that he “just [did]n't think everything was done to try and stay in Oakland, ” id. ¶ 76, as well as comments from Mark Cuban-the owner of a professional basketball team in Dallas-that he considered Oakland to be a better market than Las Vegas for an NFL team, id. ¶ 70.

         5. Oakland's Claims

         Oakland alleges that the NFL and its teams act as an anticompetitive cartel extracting significantly greater payments for stadium construction and maintenance from host cities than would be possible in a competitive market “by not only limiting the number of NFL Clubs in the United States [to thirty-two teams], but also collectively controlling, and dictating under what terms and conditions, cities can have professional football team presence.” Id. ¶ 8; see also Id. ¶¶ 23-29 (alleging that the NFL has secured public funding for a majority or significant share of the cost of several stadiums costing hundreds of millions to over a billion dollars each since 2000, and shared in relocation fees of approximately $1.4 billion). Oakland defines the relevant market for its antitrust claims as “the market of all Host Cities offering, and all cities and communities that are willing to offer (i.e., potential Host Cities), home stadia and other support to major league professional football teams in the geographic United States.” Id. ¶ 88.

         Oakland asserts the following seven claims: (1) group boycott in violation of section 1 of the Sherman Act, based on Oakland's inability to retain the Raiders or attract another NFL team so long as it is not willing to “pay the enormous demands associated with new and renovated stadia, ” id. ¶¶ 98-107; (2) concerted refusal to deal in violation of section 1 of the Sherman Act, based on Defendants' demands for stadium funding as well as “freez[ing] the number of competitive professional football teams, id. ¶¶ 108-18; (3) price fixing in violation of section 1 of the Sherman Act, based again on the demands for stadium financing, id. ¶¶ 119-29; (4) declaratory judgment that Defendants' conduct violates section 1 of the Sherman Act as a result of Defendants' “boycott of Oakland and refusal to comply with their own relocation policies” and “redistribution of the resulting ill-gotten supra-competitive gains though artificially set relocation fees, ” id. ¶¶ 130-137; (5) breach of contract under California law, based on the premise that the relocation policy is a binding contract to which Oakland is a third-party beneficiary, id. ¶¶ 138-46; (6) quantum meruit, based on Oakland's alleged investments in the Raiders in reliance on the relocation policy, id. ¶¶ 147-56; and (7) unjust enrichment, on the basis that Defendants received “ill-gotten gains resulting from their unlawful, unjust, and inequitable conduct, ” id. ¶¶ 157-61.

         Oakland claims damages including over $240 million invested in reliance on the Raiders remaining in Oakland, loss of “tax and other income that it derives from the presence of the Raiders and the economic activity their presence generates, ” and reduced property value of the Coliseum as a result of the stadium having “been boycotted by the NFL.” Id. ¶ 96. Oakland seeks treble damages for its antitrust claims. See Id. at 44 (prayer for relief).

         B. Parties' Arguments

         1. Defendants' Motion to Dismiss

         Defendants move to dismiss all of Oakland's claims with prejudice. With respect to Oakland's antitrust claims, Defendants argue that Oakland has not alleged antitrust injury, because allowing the Raiders to move to a city willing to provide more funding promotes, rather than impairs, competition, and because the restrictions on relocation tended to benefit rather than harm Oakland in its efforts to keep the team from leaving. Mot. at 7-9. Defendants contend that Oakland lacks standing because the only concrete injury it has alleged, loss of tax revenue, is a sovereign rather than commercial interest, because its indirect ownership interest in the Coliseum is insufficient, and because Oakland is not a participant in the same market as any defendant. Id. at 9-12. Defendants also argue that Oakland has not sufficiently alleged a relevant market. Id. at 12-14. Although Oakland's complaint asserts a relevant market of cities and other communities “offering . . . [or] willing to offer . . . home stadia and other support to major league professional football teams in the geographic United States, ” Compl. ¶ 88, Defendants argue that such a market is not cognizable because “[h]ost cities are not bought and sold, ” and markets must be defined by a product itself rather than the consumers of a product, Mot. at 13-14.

         In addition to those broad objections to Oakland's antitrust theory, Defendants contend that Oakland's individual antitrust claims are substantively flawed. According to Defendants, Oakland's first two claims-“Group Boycott” and “Refusal to Deal”-describe the same theory of recovery, and fail because Oakland has not alleged that that any team besides the Raiders sought to prevent the Raiders or any other team from dealing with Oakland. Id. at 15. Defendants contend that Oakland cannot bring a boycott claim based on the other NFL teams' failure to prevent the Raiders from leaving Oakland. Id. As for Oakland's price fixing claim, Defendants argue that Oakland fails to “allege an agreement between the Raiders and any other party regarding ‘rents' paid by Oakland.” Id. at 16. Defendants argue that Oakland's declaratory judgment claim is derivative of its antitrust claims and is therefore also subject to dismissal for the reasons discussed above. Id.

         Turning to Oakland's claim for breach of contract under California law, Defendants argue that the NFL's relocation policy is not a contract, both because it does not include mandatory language and because it was imposed unilaterally by the NFL Commissioner, not mutually agreed upon by the teams. Id. at 17-18. Defendants also argue that even if the relocation policy were construed as a contract, Oakland is not a party to or third-party beneficiary of the policy, and has not ...